Japan must hike sales taxes again to conquer debt: IMF

Customers browse shirts at an apparel shop in Tokyo on May 15, 2014. Japan must raise its sales tax again to conquer one of the world's heaviest public debt burdens, the International Monetary Fund (IMF) said on Thursday, July 31, 2014, as it called for deep economic reforms. -- PHOTO: AFP

TOKYO (AFP) - Japan must raise its sales tax again to conquer one of the world's heaviest public debt burdens, the International Monetary Fund (IMF) said on Thursday, as it called for deep economic reforms.

The recommendations, outlined in the Washington-based fund's annual country report, come several months after Tokyo ushered in its first sales levy increase in 17 years, which sparked concern it would derail a recovery in the world's number-three economy.

Boosting the tax rate to 8 per cent from 5 per cent was aimed at bringing down Japan's staggering debt, but Prime Minister Shinzo Abe has wavered on whether Tokyo would approve a second rate hike to 10 percent, still low compared with some Western nations.

The IMF report said the country had little choice. "Given very high levels of public debt, implementation of the second consumption tax increase is critical to establish a track record of fiscal discipline," it said.